FTSE 100 posts gains of 0 6 8211 News Corp drops bid for BSkyB

The FTSE 100 gained around 35 points to trade higher on Wednesday and retrace some of Tuesday’s heavy losses, bulled by mining strength and comments from Ben Bernanke.

The 9.5% second quarter reading of Chinese GDP, firmer than the market was expecting, has helped to ease some concerns that the current hawkish monetary policy maintained by the Chinese authorities, who hiked interest rates only a few weeks ago, is not having an overtly slowing effect on activity and metal demand. The reaction from investors to this piece of data has been positive, with moves to use yesterday’s sharp falls as an opportunity to pick up some of the heavyweight miners at lower prices.  The FTSE 350 mining sector rose on the day by 1.7% as a result, going into the London close.

Comments from Ben Bernanke, testifying to the US House of Representatives today, has also restored a degree of risk appetite to investor mentality too, further supporting Index gains. Bernanke’s testimony today maintained the Fed’s support for further easing should the economy deteriorate further. This of course gives a somewhat cynical edge to trading, as a slowing of US economic activity could spur on the Fed to increase liquidity flows into the market and potentially inflate asset prices. Bernanke’s comments comes after minutes from the latest FOMC meeting indicated that the Fed may be swaying towards further easing measures to maintain growth, although that perception is quite thin on the ground for now.

News Corp withdraws its bid for BSkyB
News Corp’s decision today to withdraw its bid for BSkyB is of no surprise to the markets. The mere fact that BSkyB’s share price barely changed initially, despite some volatility, emphasises that much of the market had already expected this move and that it had been priced in.

Given the sheer weight of criticism and unease at News Corp’s bid to take over BSkyB, be it from politicians, the public and the media, today’s decision to withdraw the bid is likely to be met with agreement by all parties.

The real question will now be whether the withdrawal of the bid is a long term decision or a mere delaying of the inevitable, with News Corp potentially revisiting the bid when conditions suit a smoother passing. This could be after a management and governance restructuring and global PR campaign to repair the huge damage done to Murdoch’s media giant.

It would be hard to conclude that shareholders of BSkyB think they have seen the last of News Corp in the medium term and their commitment to the UK broadcaster as long term shareholders, made clear in their statement today, will ensure the channels of dialogue remain open and ongoing between the two parties.